Showing 1 to 11 of 11

1.
Personal income less transfer payments (in 1996 $): The
value of the income received from all sources is stated in inflationadjusted dollars to measure the real salaries and other earnings of
all persons. Income levels are important because they help
d

1. Building permits, new private housing units: The number of
residential building permits issued is an indication of construction
activity, which typically leads most other types of economic production.
2.
Stock prices, 500 common stocks: The Standard &

Macroeconomics: the business cycle, growth, inflation and
unemployment.
In the last four year of the 20
th
century, the US economy enjoyed
rapid growth in its GDP (Gross Domestic Product)
while equally enjoying low rates of inflation. Since then we have
h

1.
Change in labor cost per unit of output, manufacturing: Measures
the rate of change in an index that rises when labor costs for manufacturing
firms rise faster than their production (and vice versa). The index is
constructed from various components, in

Nominal GDP vs. Real GDP
Real GDP measures the value of goods and services adjusted for
change in the price level. It will reflect the real change in output. This
measure is called the Constant Dollar GDP and indicates what the GDP
would be if the purchas

Other National Accounts Definitions:
Net Domestic Product (NDP) equals GDP minus Depreciation
Since depreciation is the repair and replacement cost of old,
obsolete equipment, it does not add to the GDP in a real sense.
National Income (NI) equals NDP plu

Stocks and flows
An analogy of a reservoir may be helpful in thinking about a
nations capital stock, investment, and depreciation. Picture a
reservoir that has water flowing in from a river and flowing out
from an outlet after it passes through turbines.

Gross Domestic Product GDP
Market Value of the total goods and services produced within
the boundaries of the US whether by Americans or foreigners in one
year
uses monetary measure-attaching a price tag to products
produced
avoiding multiple counting:

Circular Flow Model
Economists use the circular flow diagram to show the high
degree of economic interdependence in our economy. Money flows in
one direction while goods, services, and the factors of production flow in
the opposite direction.
This simpl

GDP is only a measure of the volume of goods and services
produced.
There is thought to be a strong positive correlation between real GDP and
economic well-being. Greater production means the good life. But
there are some shortcomings.
1.
Non market trans